Asymmetric effects of interest rate changes: the role of the consumption-wealth channel
This article examines the role of the consumption-wealth channel in explaining asymmetric effects of monetary policy changes. Towards this end, we draw upon available literature on the consumption function and behavioural finance to construct a framework for asymmetric effects of monetary
policy caused by the impact of wealth changes on aggregate consumption. We then employ data from the UK to examine the validity of the proposed framework. In the context of a liberalized economy with easy access to consumer credit, wealth reduction due to monetary tightening is expected to
have weaker impact on spending than increase in wealth. Our results validate the above hypothesis.
No Reference information available - sign in for access.
No Citation information available - sign in for access.
No Supplementary Data.
No Article Media
Document Type: Research Article
Department of Economics,Curtin Business School, Perth WA 6845, Australia
Department of Accounting and Finance,Birmingham Business School, University of Birmingham, Birmingham B15 2TT, UK
Department of Accounting, ,Finance and Economics, Business School, University of Hertfordshire, HatfieldHerts AL10 9AB, UK
Publication date: 2011-06-01
More about this publication?